Can a business owner collect unemployment benefits in Washington?
I had to close my small retail business last month after 6 years due to rising rent and declining foot traffic. I'm wondering if I can file for Washington ESD unemployment benefits? I was the sole owner and paid myself through owner's draws rather than a regular W-2 salary. I did pay into the state unemployment system for my two employees before I had to let them go. Does anyone know if business owners are eligible for UI benefits in Washington state?
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Carmen Lopez
Business owners typically can't collect regular UI benefits because you weren't technically an 'employee' receiving wages subject to unemployment tax withholding. Since you took owner draws instead of W-2 wages, Washington ESD won't have a wage record to base a claim on.
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Yuki Ito
•That's what I was afraid of. So even though I paid unemployment taxes for my employees, I wasn't covered myself?
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Carmen Lopez
•Exactly. The unemployment system is designed for employees who have wages reported on their W-2s and unemployment taxes withheld from their paychecks.
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Andre Dupont
Wait, I think there might be exceptions for some business owners. My brother-in-law had an LLC and was able to get benefits when his business failed, but I'm not sure of the details.
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QuantumQuasar
•Some business owners can elect to pay into the unemployment system for themselves, but it's not automatic. You have to specifically choose this option and pay the taxes on your own wages.
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Yuki Ito
•I never knew this was an option. Is it too late to elect this coverage now that my business is closed?
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Zoe Papanikolaou
I went through something similar last year. If you want to get definitive answers about your specific situation, you might want to try Claimyr to actually speak with a Washington ESD agent. I found their service at claimyr.com and watched their demo video (https://youtu.be/7DieNd3C7zQ) - it helped me get through to someone who could explain my eligibility in detail.
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Yuki Ito
•Thanks for the suggestion! I've been trying to call Washington ESD for days but keep getting busy signals or disconnected.
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Jamal Wilson
•Same here, their phone lines are impossible. How much does that Claimyr service cost?
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Zoe Papanikolaou
•They focus on getting you connected rather than the cost. Worth checking out if you need real answers about business owner eligibility.
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Mei Lin
Unfortunately, most sole proprietors and business owners aren't eligible for regular unemployment benefits in Washington. The system is really set up for traditional employees. You might want to look into other options like small business disaster relief programs or SBA assistance.
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Yuki Ito
•I hadn't thought about SBA programs. Are there specific ones for businesses that had to close due to economic conditions?
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Mei Lin
•Yes, there are various SBA loan programs and sometimes grants available. Worth researching on their website or contacting your local SCORE chapter.
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Liam Fitzgerald
this is so frustrating!! why do business owners pay into the system for their employees but can't get benefits themselves when the business fails? makes no sense
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Carmen Lopez
•I understand the frustration, but the unemployment system was designed around the employer-employee relationship. Business owners have different tax structures and risk profiles.
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Liam Fitzgerald
•still unfair when we're the ones creating jobs and taking all the risk
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QuantumQuasar
There are some very specific exceptions, but they're rare. If you were operating as a corporation and paying yourself a regular salary with W-2s (not just owner draws), and you were paying unemployment taxes on those wages, you might have eligibility. But this is uncommon for small business owners.
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Yuki Ito
•I was set up as an LLC and took distributions rather than salary, so I guess that rules me out completely.
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Amara Nnamani
•Yeah, LLC distributions aren't considered wages for unemployment purposes. Different tax treatment entirely.
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Jamal Wilson
Have you considered that you might be eligible to work for someone else now and build up new wage credits? Sometimes former business owners can transition to employment and then potentially qualify for benefits if they lose that job later.
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Yuki Ito
•That's actually what I'm planning to do - look for employment while I figure out my next steps. Good point about building up wage credits.
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Jamal Wilson
•Just remember you need to work long enough to establish a base year period with sufficient wages before you'd be eligible for benefits.
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Andre Dupont
I know someone who used that Claimyr service to get clarity on their business owner situation. They were able to speak with a Washington ESD representative who explained exactly what their options were based on how their business was structured.
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Yuki Ito
•That sounds really helpful. I'm definitely going to check them out since I can't get through on the regular phone lines.
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Giovanni Mancini
•Seconding this - I used Claimyr when I had questions about my eligibility and it saved me weeks of trying to get through to Washington ESD on my own.
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NebulaNinja
Sorry to hear about your business closure. The retail sector has been really tough lately. Even though you probably can't get UI benefits, make sure to apply for any local business support programs or workforce development assistance that might be available.
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Yuki Ito
•Thank you. Yes, it's been really challenging with rent increases and changes in shopping patterns. I'll look into local programs.
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Fatima Al-Suwaidi
Just to be clear - you definitely should still file an application with Washington ESD to get an official determination. Sometimes there are nuances in individual cases that only they can evaluate properly.
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Yuki Ito
•Good advice. Even if I expect to be denied, having the official determination would be helpful.
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QuantumQuasar
•Absolutely right. And if you do get denied, you'll have the appeal rights and timeline clearly laid out in their decision letter.
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Dylan Mitchell
The key question Washington ESD will ask is whether you had 'wages' in covered employment during your base period. Owner draws and business profits typically don't count as wages for UI purposes.
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Yuki Ito
•That makes sense. I guess I was hoping there might be some provision I didn't know about.
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Dylan Mitchell
•Unfortunately, the eligibility requirements are pretty strict. But definitely worth getting the official word from Washington ESD on your specific situation.
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Sofia Morales
might be worth checking if you qualify for any pandemic-related business relief programs that are still available? some of those had different eligibility rules
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Yuki Ito
•I looked into those earlier but most of the pandemic business programs have ended or have very limited funding left.
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Dmitry Popov
I had a similar situation with my consulting business. Even though I occasionally hired contractors, I wasn't eligible for UI benefits because I didn't pay myself regular wages with tax withholding. The system just isn't set up for business owners.
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Yuki Ito
•It's frustrating but I guess I understand the logic. What did you end up doing for income while transitioning?
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Dmitry Popov
•I took on some freelance work in my field while job hunting. It helped bridge the gap financially.
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Ava Garcia
Before you give up completely, you should really try to speak with a Washington ESD specialist about your specific business structure. That Claimyr service people mentioned might be your best bet for actually getting through to someone knowledgeable.
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Yuki Ito
•You're right. I'm going to try Claimyr today. Even if the answer is no, I want to hear it directly from Washington ESD and understand my options going forward.
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StarSailor}
One thing to consider - if you do find employment now, make sure your new employer is properly withholding unemployment taxes so you'll have coverage if something happens to that job in the future.
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Yuki Ito
•Definitely. After going through this experience, I realize how important that safety net is for employees.
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Miguel Silva
The whole system seems backward sometimes. Business owners take all the risk, create jobs, pay taxes, but when things go wrong we're on our own while employees get benefits.
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Carmen Lopez
•I understand the frustration, but unemployment insurance is specifically an insurance program for wage earners. Business owners have other types of insurance and business protection options available.
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Miguel Silva
•True, but those other options are expensive and not always accessible for small business owners.
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Zainab Ismail
OP, what industry was your retail business in? Depending on the field, there might be industry-specific transition assistance programs available.
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Yuki Ito
•It was a small gift and home decor shop. I'm not aware of specific programs for retail, but I should probably research that.
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Connor O'Neill
Bottom line - file the application anyway and see what Washington ESD says officially. Worst case, you get a clear denial with information about your appeal rights. Best case, there might be some aspect of your situation that creates eligibility you weren't aware of.
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Yuki Ito
•That's exactly what I'm going to do. Thanks everyone for all the advice and information. This thread has been really helpful in understanding my options.
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QuantumQuasar
•Good luck with everything! Even if UI benefits aren't available, there are other resources out there for people transitioning from business ownership to employment.
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